Punitive damages emerge as flashpoint in latest malpractice reform push

Responding to doctors’ concerns that New Mexico’s malpractice system is making it hard to practice medicine, leading lawmakers hope to rein in tactics lawyers use to win awards for injured patients. 

The bills they are crafting are highly technical, but the dry mechanics of legal maneuvering and insurance rate-setting have generated volatile debate at the Roundhouse. At hearings last fall, as lawmakers heard from invited experts, the adversarial structure of the courtroom bled into the debate. Lawmakers sparred passionately with one another, trading accusations of bias, and some questioned whether there’s a problem at all. 

Both sides cast themselves as defenders of patients: 

Doctors, who seek a more favorable climate for recruiting medical providers and expanding access to care. 

And malpractice attorneys, who champion justice for injured patients and accountability for negligent caregivers. 

As the session begins, lawmakers have begun filing bills seeking a number of changes, foremost among them to end the practice of beginning almost all malpractice lawsuits with the threat of punitive damages, which are uncapped under New Mexico law and impossible to insure against. 

Democratic Gov. Michelle Lujan Grisham, a lame duck, is expected to include medical malpractice reform on her “call” of topics for the off-year session that begins today, and is otherwise devoted to the budget. But it will compete with other priorities, during a 30-day sprint, where lawmakers remain deeply divided on the issue.

A recurring debate

At the heart of medical malpractice law is how to manage risks intrinsic to medical care, which often involves invasive procedures on fragile patients, where the uncertainties of each human body inevitably produce different outcomes. 

The state’s Medical Malpractice Act addresses how patients and attorneys seek compensation for adverse outcomes attributable to health care providers; how clinicians and hospitals buy insurance to pool risk; whether the state limits their exposure; and whether those choices produce a health care system in which providers give patients the best possible care.

Reforming that is a tall order for legislators. In practice, they have often tinkered with small parts in isolation, altering the balance between patients and providers and attorneys and insurers, and sparking new debates. That helps explain why the debate has raged at the Roundhouse for the last five years, with white-coated doctors a recurring sight. 

The blow-up began in 2021, when an effort to change an arcane part of the state’s insurance system mushroomed into a complex bill touching many parts of medical malpractice. The changes raised damage awards, broadened the definition of “independent providers” to include nurses, and altered the composition and management of the state Patient Compensation Fund, which partially insures most health care providers. Trial lawyers supported the changes. Independent physicians and hospitals say they grudgingly accepted them. 

If lawmakers thought they were done, they were mistaken. Independent physicians saw their exposure to malpractice litigation spike, and urgently sought changes. Lawmakers acquiesced in a special session later that year, and made further technical fixes in 2023. 

But health care providers continued to argue that a malpractice system tilted against them is driving doctors from the state, and in 2025, lawmakers reopened the matter.

This year, a growing number of Democratic leaders say they are ready to make some changes. 

“There's an imbalance in our statute, and that imbalance is to the detriment of the health care providers,” said Rep. Christine Chandler, a Democrat from Los Alamos who chairs the House Judiciary committee, in an interview. A “whole litany” of factors keep the state from retaining doctors, she said, all deserving attention, “but I don't think that means we shouldn't look at medical malpractice, too.”

Diagnosing New Mexico’s problems

It’s difficult to agree on a solution if you can’t first agree on the problem. The best available data settle some debates.

First, compared to the national average and other states in the region while controlling for population, New Mexico has a disproportionate number of malpractice claims resulting in payment.

Malpractice payments must generally be reported to the National Practitioner Data Bank.  The data show that since the 1990s, the rate of paid malpractice claims has fallen elsewhere, which experts attribute to both improved clinical safety measures and tort reforms that make it harder for injured patients to bring cases. New Mexico has not seen a similar decline. In fact, claims have risen starkly since 2020, to well over double the national rate.

Visualization: https://public.flourish.studio/visualisation/27279256/

According to Robert Oshel, who established the data bank’s research program nearly two decades ago, New Mexico had more malpractice incidents resulting in payment than nearly any other state. “It suggests there's a problem,” he said in an interview. As in other states, the average payment size in New Mexico has risen moderately, with large payments a growing share of the total, but what stands out most is the frequency of cases.

Doctors in the state also pay eye-watering premiums for malpractice insurance, particularly in high-risk specialties. While comparisons with other states are complicated, Superintendent of Insurance Alice Kane told legislators on Nov. 6 that overall, New Mexico clinicians pay about double neighboring states and that premiums have risen by roughly 40% since January 2022.

The causes of premium hikes are debated. Some lawmakers suspect insurers are gouging physicians. Others have blamed the state’s Patient Compensation Fund, although a spokesperson for the Superintendent of Insurance refuted that. Whatever the cause, numerous clinicians cite the rate hikes as they leave private practice, or the profession altogether.

Statewide, the number of independent physicians actively practicing has been shrinking, and with it, patients’ already limited access to care. 

On behalf of the Physicians Advocacy Institute, a nonprofit advocacy organization that represents doctors, the health care consultancy Avalere analyzed the IQVIA data, excluding physicians employed in academic settings, correctional facilities or strictly in management capacities, and found that between 2019 and 2024, the number of independent doctors actively seeing patients fell from 1,145 to 674, a 41% decline. While the number of physicians practicing nationwide rose 7.3%, New Mexico’s total fell 8.1%. 

Reining in punitive damages 

Health care providers say their priority this session is to rein in a part of medical malpractice they find particularly perilous: punitive damages.

Adverse outcomes in medicine are inevitable, and over their careers even the most scrupulous doctors expect to be sued at least once. In most malpractice cases where a clinician is found at fault, the patient is compensated both for their medical expenses and lost wages, known as economic damages, and their pain and suffering, or non-economic damages. Other than for medical expenses, awards are capped at an amount that rises with inflation, currently nearing $1 million for independent doctors and $6 million for hospitals. 

Because patients’ injuries can be severe and the awards large, doctors are required to carry malpractice insurance, much like motorists must carry liability insurance. So paying these damages does not typically threaten their personal assets.

But in rare cases where a clinician is found to have acted recklessly, willfully or utterly indifferently, state law also allows them — and sometimes a deeper-pocketed hospital that employs them — to be fined punitive damages, which are meant to deter the most egregious behavior. Crucially, since punitive damages allege misconduct, insurers do not cover them. 

Both doctors and attorneys agree that it’s rare for a health care provider to act in a way that justifies punitive damages. 

But in New Mexico, and unlike in other states, attorneys seek them in almost every case. 

Data from one of the state’s main insurers, The Doctor’s Company, show that attorneys sought punitive damages in 92% of its open claims in New Mexico since 2017. Attorneys can and do file for these before the discovery process has allowed them to examine all the evidence, in part because they can — state law requires the lowest legal standard of proof to do so (the “preponderance of evidence”).

Physicians say that being threatened with damages for which they cannot insure is deeply unnerving. 

Dr. Gabrielle Adams, a long-time gastroenterologist and president-elect of the Greater Albuquerque Medical Association, said physicians labor under the constant fear that a jury verdict could put their retirement savings, college funds and even homes on the line. The worry has been so palpable for her household that she and her husband broached the idea of divorcing to untangle their financial lives and protect some of their assets.

Lisa Curtis, an attorney who believes she has tried more malpractice cases in the state than any other individual, said doctors’ gripes were overblown because punitive damages are rarely awarded. “There are no punitive verdicts that are ever paid by the doctors. It doesn't happen.” She defended the practice of filing for punitive damages in the initial complaint because evidence found in discovery could justify them but a judge might not agree to add them later.

But legal observers say that seeking punitive damages works to the advantage of plaintiffs even when they are not awarded — and could be contributing to the frequency of cases in New Mexico.

By threatening doctors’ personal assets, punitive damages create a strong incentive for them to settle, whether or not they were negligent. The contention that they are used strategically, for leverage, “makes complete sense to me,” said Mary Pareja, a professor who teaches torts at University of New Mexico Law School. 

From across the state line in Colorado, New Mexico’s legal culture looks outside the norm. Lorraine Parker, one of Denver’s leading malpractice attorneys, emailed, “I disagree with alleging punitive damages in every case.” She was careful to say she is not licensed in New Mexico and cannot cast judgment on attorneys there, but her preference is not to file for punitive damages without a good faith basis or evidence to justify them. 

Colorado allows attorneys to petition for punitive damages only after substantially completing the discovery process and convincing the judge the evidence meriting them is “beyond a reasonable doubt,” the highest standard of proof. In fact, during Parker’s 30-year career, she could not recall a single instance of moving for them in a medical malpractice case.

That’s not good for patients in Colorado, Parker said, because it’s given health care providers and their insurers all the leverage. But she sympathizes with doctors caught in the crosshairs. 

Chandler reviewed some of Colorado’s provisions while drafting a bill she filed this session, House Bill 99. Among other changes, it would allow attorneys to seek punitive damages only after the legal discovery process is complete by meeting a middle-ground of proof with “clear and convincing” evidence. 

Chandler’s bill would also cap punitive damages paid by clinicians and hospitals at different levels, using the thresholds already applied to non-economic damages. Rep. Jenifer Jones, a Deming Republican, pre-filed her own bill, House Bill 107, which uses the highest “beyond a reasonable doubt” standard for punitive damages and allows hospitals to be fined up to three times their compensatory cap.

Curtis said capping punitive damages is “the worst thing that we could ever do” because the only verdict that will chasten a behemoth hospital is a penalty proportional to its budget. “Capping punitive damages just means they can never, ever feel any pain for the decisions they make that hurt people,” she said.

As an alternative, a third bill being crafted by House Majority Floor Leader Reena Szczepanski, a Santa Fe Democrat, would protect doctor’s personal assets from punitive damage verdicts. She explained, “Whether punitive damages end up being awarded or not, if you start at the get-go thinking that potentially you could lose everything, that is not something that I want to see.”

A difficult path in a brief session

Momentum may be building around narrow changes to medical malpractice, but significant rifts remain.

A major hurdle is a group of Democrats who describe many of the state’s hospitals as private-equity controlled, money-hungry businesses, and who don’t want to grant them an inch of relief. Rep. Marianna Anaya, an Albuquerque Democrat, said in an interview that changing independent doctors’ exposure to punitive damages “should be on the table,” but not “big corporate hospitals.”

According to close observers, the chokepoint is likely the Senate Judiciary Committee. Of the committee’s eight current members, two Democrats — chairman Sen. Joseph Cervantes of Las Cruces and Sen. Katy Duhigg, from Albuquerque — are themselves medical malpractice attorneys who have opposed reforms throughout the interim. If they remain on the committee and vote no, reformers could only afford to lose one more lawmaker if they want the committee’s approval.

During an interim hearing, Duhigg said the real problem was the prevalence of negligence in New Mexican medical care. “None of the solutions here before us today do anything to reduce medical malpractice,” she told her colleagues. “They just reduce lawsuits.”

But residents shouldn’t expect malpractice reforms to change health care one way or another, according to Michelle Mello, a law professor at Stanford who is a leading expert on how litigation impacts health care practice. “Americans cling to the tort system despite its gross inefficiencies out of the belief that it is making care better, making doctors more careful. Unfortunately,” she said, “we don't actually observe that.”